U.K. Begins Quantitative Easing

by: Adrienne Gonzalez

Looks like half past inflation to me

Just to prove how distorted a given country's citizens' view of money, inflation, and intrinsic worth derived from currency can be, let's take a moment to see what's going on across the pond. This is especially important since our darling President and Timmy the Lonely Treasury Secretary are headed to London to come up with fresh and exciting ways to debase the currency. I'm sure PM Brown and his central bank will be able to offer plenty of advice.

Reuters on the UK's quantitative easing scheme:

The Bank of England stepped up its quantitative easing programme on Thursday, saying it would buy 5 billion pounds of gilts next week after investors eagerly offloaded 2 billion pounds worth on Wednesday.

The Bank has committed to buy 75 billion pounds of assets, mostly gilts, from investors using newly created money, to increase the money supply and encourage banks to lend more freely to firms and consumers and ease the recession.

The central bank said it would buy 2 billion pounds of longer-dated gilts with maturities ranging from 2020-2032 on March 16, and a further 3 billion pounds of shorter-dated gilts with maturities of 2014-2019 on March 18.

At its first reverse auction to buy gilts on Wednesday, investors wanted to sell more than 10 billion pounds of gilts to the Bank of England, five times what it was bidding to buy.

"I think what we saw yesterday was the BoE testing the water. They're comfortable enough to push the market a bit further next week," said Sean Maloney, a strategist at Nomura International.

No, Sean, what you saw yesterday was the BoE behaving recklessly in a race to the bottom. Ironically, the Bank of England also says that the public perception of inflation on that side of the water is strangely rosy. In fact, most "perceive" a drop in inflation. Further proof that the economic demolition teams imploding economies around the world with their harebrained schemes aren't the only ones drinking the Kool-aid.

Britons' expectations for inflation over the next year dropped to their lowest level in nearly four years, the Bank of England said today.

The Bank of England/GfK NOP inflation attitudes survey for February showed that the public's expectations for inflation over the next 12 months fell to 2.1% in February from 2.8% in November.

It also revealed that Britons thought inflation was 4.2% in February, down from 4.9% in November. This was the biggest quarterly fall in estimates of inflation since the survey started in 1999.

Yes, well, obviously the BoE has been discussing this with Helicopter Ben. Go, Zimbabwe, go!